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Chirol
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Chirol

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July 7th, 2005

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Iron Chancellor?

Slate has a good article for those interested in German politics and the (probable) upcoming elections in September.

Deutschland’s Iron Lady
Is Angela Merkel the next Maggie Thatcher?

Gerhard Schröder came to Washington last week for what’s likely to be his final visit as German chancellor. This May, after his Social Democratic Party (known in Germany by the initials SPD) was trounced in state elections, Schröder decided to call voters to the national polls in September, a year earlier than necessary, a move some commentators derided as political suicide. Since the SPD’s conservative rival, the Christian Democratic Union, regularly pulls in nearly twice the SPD’s approval ratings (the SPD is stuck in the 20s), it’s hard to find anyone who expects Schröder to be in office come October.

Here are a few more gems:

“If Angela Merkel succeeds “¦ the Federal Republic should see changes more radical than any since 1949.”

Not so fast. Biographies aside, Merkel is no Thatcher. Not only does Germany’s political structure prevent the chancellor from taking on a strong leadership role, but voters are favoring her party largely because they are fed up with Schröder””?not because they are sick of the welfare state. What’s more, Merkel lacks both unified CDU support and the charisma to rally the public behind her reforms, both of which were key elements to Thatcher’s success. And in any case, there’s little evidence that her party’s reform package will be much harsher than Schröder’s current agenda. “Merkel will not be an eiserne Kanzlerin, nor a Margaret Thatcher, nor a radical reformer,” says Peter Lösche, a political scientist at the University of Göttingen.

Indeed, it is easy to forget that Germany’s political system intentionally makes it difficult to centralize authority for obvious reasons.

Compared with Britain or France, Germany’s political structure gives much more power to the states and quasi-public institutions””?such as unions””?at the expense of the chancellor, who, as in Britain, is chosen not by direct election but by the winning party. But whereas in Britain and elsewhere the party with the most seats forms the government (known as “first-past-the-post”), Germany requires an absolute majority before a party can take power, meaning that the power of the leading party is usually diluted by its need to form a coalition with smaller parties. Thus, the chancellor is at the mercy of myriad factions and local power centers, any of whom can upset a risky reform package.Merkel’s reforms will be a little bit more aggressive than Schröder’s, but the bottom line will be continuity,” says Lösche.

Unless the CDU wins an absolute majority, which will be close, but unlikely, it wouldn’t have the power to simply pass any legislation it wanted to. Even if they do, we’re still dealing with a John Kerry Effect.

While it would be unfair to dismiss Merkel’s free-market bona fides completely at this point, it’s clear that her near-canonization by European and American conservatives shows how readily they gloss over the details in their search for like-minded pols the world over. Such myopia is the result of forgetting that terms like “conservative” and “market reforms” mean different things in different contexts.

Germans, and Europeans in general, have a lot of love for their social systems, despite the glaring fact that they don’t work. It will take more than the current problems to convince them of otherwise. Europeans are little Peter Pans. They’ve seen the real world and don’t want to grow up.

Comments to this entry

Kenneth
July 8, 2005
2:04 am
My solution: deregulate the economy almost entirely, massively cut taxes, abolish the corporate tax, the sales tax, ect, eliminate the progressive income tax and replace it with a flat tax, to be cut further over the years as the debt is paid off. Drop all tariffs and trade restrictions. Privatize healthcare completely. Privatize education completely. Scrap all government departments except those of defense and justice, as well as a precious few public utilities. Privatize the pension system and all government owned companies that patently don't need to be government owned. End all corporate subsidies. End welfare. Repeal all labour laws including minimum wage and child labour laws. Eliminate severance pay. Abolish government setting of interest rates, let them be set by the market instead. Set up a long term goal of reducing government's share in the economy to 10% (from 40 or 50 something percent that it is right now in Germany). Balance the budget. Structure monetary policy around maintaining a stable inflation rate. Eliminate Keynesian fiscal policies for the sake of maintaining a balanced budget. In short, give the market free reign. Neoliberal shock therapy. It worked in Chile, it'll work even better in Germany, a country with a massive (albeit stagnant) industrial base.
snow
July 8, 2005
2:09 am
Sounds promising, Kenneth, I wish they would try at least some of your suggestions in Canada and the US, too!
Grendel
July 8, 2005
6:27 am
Privatize healthcare completely. [...] End welfare.

That bears the risk to turn the country into a third world country - healthcare and welfare-wise - just like the United States (over 35m people living in "poverty":http://www.census.gov/hhes/www/poverty/poverty.html)

Balance the budget.

Difficult to achieve if you eliminate all the taxes you mentioned, although lowering expenditures is certainly the only way to go. Where to cut down, that's the question everybody tries to answer best.

Haven't heard of Chile having a good standard of living btw. I don't think copying strategies from other countries 1:1 is helpful either.
Curzon
July 8, 2005
6:36 am
Chile is the richest nation in South America, with the highest standard of living, the largest proportion of the middle class, and the fewest proportion of its people in poverty on the continent. Is has a stable polity, a healthy resource based economy (compared to an unhealthy resource-based economy such as Venezuela), wholly privatized social security, and as of this year an FTA with the US.

Viva Chile!
snow
July 8, 2005
6:42 am
Well there may be too many people in the US living in poverty, but at the same time, France's GDP would place the country as one of the poorest states in America, not that the French would ever join. And how about Sweden's GDP which places it on par with blacks in the US, who have an income of 70% of the average?

America certainly does have poverty (and European countries don't?), but interesting how the State's overall prosperity has now pushed it quite a ways ahead of the weakening welfare states of Europe, with no end in sight to the weakness.
Curzon
July 8, 2005
7:12 am
It's also peculiar how we define poverty. There are people in the US who indeed can't afford health care and yet are grossly overweight, own enormous houses (albeit in poor areas), have such luxuries as televisions, microwaves, more than one car, etc. Throwing money at this problem won't solve it, it is predominately based in culture and personal responsibility. Also of note is how immobile our lower class is, at least for the past 40+ years. (And in case you were wondering, this was not a veiled racial reference. I mean what I say regardless of black, white, or other.)
heirabbit
July 8, 2005
8:09 am
Excellent post, Curzon. I was a classical guitar performer "living below the poverty line" in America, and it was the best time of my life. I drove a 1985 RX-7, had an apple computer, a 100+sq. meter apartment in downtown Columubus, Ohio. The differences in my actual quality of life and my mothers' (who is in the highest quintile, made over 10 times my salary) were miniscule at best. I don't buy Americans saying that there's so many poor people there, mainly because the capital conditions there are so good, so much good, cheap and second-hand stuff, that to say anyone is materially lacking is getting a bit silly. The question seems to be a "poverty culture", crime, and general lack of self-control.
Kenneth
July 9, 2005
2:08 am
Grendel: it's true that many people in the US live in poverty. However, it is instructive to compare this value with that of far more economically conservative countries such as Hong Kong, Luxembourg, and Singapore, all of whom boast low unemployment, high growth, and in Luxembourg's case the highest per capita income in the world. I'd like to note that the US healthcare sector, while private, is highly regulated: doctors spend hours filling out useless paperwork, and the FDA state-sanctions high drug prices with their meaningless and draconian regulations. There is a lot of incompetent bureaucracy in the US. Look carefully before you equate the free market with the systematic creation of poverty.
Kenneth
July 9, 2005
2:21 am
Snow: _Sounds promising, Kenneth, I wish they would try at least some of your suggestions in Canada and the US, too!_

Thanks for the moral support. Many of my fellow countrymen and women accuse me of being dogmatic, narrow-minded, arrogant, ect, ignoring me as I try to explain the fundamentals of the market to them. Being a mere 15 years old is a major disadvantage in this regard. Somehow they think that I'm a naive ideologue, but in reality I'm just looking at the facts and considering them within a theoretical framework. Rest assured, it gets _very_ frustrating.
Grendel
July 9, 2005
2:27 pm
However, it is instructive to compare this value with that of far more economically conservative countries such as Hong Kong, ...

Kenneth, if you take a second look, I didn't compare the US poverty to any of the countries. The reference to Chile stems from your post - and as you write in your second comment, a comparison is indeed instructive - although I see it as a general shortcoming to apply one country's solution (Chile) to another (Germany) 1:1 and hope it's going to work.

Look carefully before you equate the free market with the systematic creation of poverty.

Looking at the numbers, privatization of health-care and (in comparison) decreasing welfare didn't help in the US, why should it in Germany? I'm not saying it's working well in Germany, but instead of looking to another problematic system, better try something else.
Although, I might have misunderstood what you're aiming at in your first comment? In Europe, Keynasian policy is increasingly being critized anyway since it's mainly aiming at individual countries - but since the creation of the European Union there're inderdepencies through the close interweaving of national economies. About privatization in general, the government is gradually decreasing it's share in companies, but many of them are not ready for the free market yet. If you push extreme measures in this regard to fast too far, the number of unemployed could easily go up.
heirabbit
July 10, 2005
1:07 pm
Kenneth's point is well taken. We need to draw a clear line between exactly what is public and private.